BRAZIL Trends and Developments Contributed by: Karina Goldberg and Bruno Monteiro, Ferro, Castro Neves, Daltro & Gomide Advogados
paragraph 1, of the Brazilian Arbitration Law establish - es that, “The parties may freely choose the rules of law that will apply in the arbitration, provided that there is no violation of good customs and public order”. Therefore, the Brazilian Arbitration Law authorises the parties to elect the law applicable to the dispute, including foreign law. Leading scholars consider that Article 2 of the Arbitration Act reflects a specific legal framework that is designed to govern arbitration pro - ceedings, and which should prevail over the LINDB. Accordingly, arbitrators in international cases should apply the substantive law chosen by the parties rather than default conflict-of-law rules. The limits of the parties’ freedom to choose the applicable law and the means of dispute resolution As seen, Brazilian law generally allows the parties to define the rules applicable to legal relationships and the manner of resolving any disputes between them. However, the Brazilian Arbitration Law, as is the case in other rules under Brazilian law, refers generically to the fact that the choice of arbitration and of for - eign law must not imply a violation of “public order.” The LINDB itself contains a provision to this effect in Article 17, according to which “declarations shall not be effective in Brazil when they offend national sover - eignty, public order, and good morals”. There is, however, considerable debate about what can be considered a matter of public order under Brazilian law. It is widely recognised that public order cannot be reduced to an exhaustive and precise defi - nition; one scholar has even argued that the key char - acteristic of public order may be its lack of definition. Rules that aim at preserving the values and interests of a society through positive action by the state, and in accordance with the constitution, are usually con - sidered shown great deference. As a result, despite their lack of a specific definition, public order rules capable of limiting the autonomy of will and contrac - tual freedom of the parties to an arbitration over an international contract are present in the Brazilian legal system and considered mandatory. This system is also in accordance with the UNIDROIT Principles, according to which “there are mandatory rules, whether of national, international or supra-
national origin, which, if applicable in accordance with the relevant rules of private international law, prevail over the provisions contained in the Principles and from which the parties cannot derogate”. Precisely for this reason, the UNIDROIT Principles themselves establish the illegality of contractual provisions con - trary to mandatory national rules, so that, “Not only must parties conclude the contract without error and without constraints, but the contract must also not violate the applicable mandatory rules”. In addition to the prohibition on violating public order, as established in Article 1 of the Brazilian Arbitration Law, it is clear that the autonomy of the parties to choose the applicable law and form of dispute res - olution is restricted to those rights that the parties can transact or waive. Thus, for example, in Brazil, rights such as filiation and family cohabitation, as well as rights related to the status of workers, cannot be transacted and cannot be subject to dispute in arbi - tration. Not only that, but there are also specific situations in which Brazilian law expressly establishes the impos - sibility of resolving conflicts through arbitration and the choice of foreign law. This is the case, for example, in most employment law contexts. On this subject, Article 507-A of Decree-Law 5,452/1943 only allows arbitration as a means of dispute resolution in employ - ment contracts with a certain minimum remuneration, provided that the arbitration clause is agreed “at the initiative of the employee or with their express con - sent”. Similarly, the law also excludes the arbitrability of rights related to consumer relations. In this sense, Article 51, VII, of Federal Law 8,078/1990 provides that provisions in contracts for the supply of prod - ucts and services subject to consumer legislation that “determine the compulsory use of arbitration” are null and void. In other words, Brazilian law establishes that, as a general rule, in exercising their freedom of contract, parties to private law transactions have broad rights to choose the rules of law applicable to international contracts. The exercise of this freedom of contract may be restricted only if:
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